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Office 365: Can Microsoft replace Microsoft?

The desktop roadblock

When it comes to selling new versions of Office, Microsoft's toughest competitor isn't IBM or Google. It's Microsoft.

Typically, when Microsoft releases brand new version of its desktop productivity suite, large numbers of customers cling to the versions they already have. The old versions do exactly what they want, and the new features seem unnecessary.

Office 365 – due from Microsoft on Tuesday – is Redmond's latest attempt to shove enterprise holdouts onto a new version of its Office software. But this time, the carrot isn't BI integration or some obscure new button. It's the web.

With Office 365, Microsoft is finally trying to turn its productivity, email, and collaboration suite into a citizen of the net, with all the benefits that entails, including low costs and ease of administration.

Office 365 offers hosted versions of a family of server products launched by Microsoft last year: Exchange Online 2010, Lync Online 2010, and SharePoint Online 2010. Plus, you get Office Web Apps, a version of Office that runs in the browser.

But there's a catch. Office 365 is only marginally useful if you haven't licensed the desktop version of Office. You'll need either Office 2010 Professional Plus or Office 2007 SP2. Office 2003 – supported by BPOS, the percusor to Office 365 – is gone. Also out is the Office Communicator used with the Lync Server.

This time, Microsoft is pushing you towards the new desktop Office in a slightly different way. The existing Office 2010 Professional Plus is actually being sold with Office 365 service – but under a slightly different name and pricing model. It's called Pro Plus, and it's not something you own. You pay a subscription fee.

And there's another catch: not everybody can buy Office 2010 Professional Plus. It's only available to customers who spend relatively large amounts with Microsoft and who have enough PCs to qualify for Microsoft's volume-licensing-based Enterprise Agreement (EA). These big customers are often several years behind in adopting the newest version of Office.

Office Web Apps include Word, Excel, PowerPoint, and OneNote, but what you can do is limited. For instance, macros don't work in the web version of Excel, and Office Web Apps can only open documents on a SharePoint site, meaning the person you're collaborating with must run SharePoint as well.

In a further nudge towards the new, Office 365 won't run on Internet Explorer 6. You'll need IE7, 8 or 9; Safari 4 or later; Firefox 3 or later; or Chrome 3 or later. You can run Windows or Mac OS X. but Linux is not supported.

The cloud was meant to set us free from the shackles of buying, installing, and maintaining software here on earth. But Microsoft has more than $14bn tied up in its earth-bound Office franchise.

So while Office 365 might offer greater flexibility in terms of how and where your people work, it's been designed to complement desktop Office rather than replace it From Microsoft's perspective, it's a good hedge. Test the new without killing the old. ®